In 2015, the syndicated loan market was valued at US$1.8 trillion in the United States, €1.1 trillion in EMEA, and US$450.1 billion in APAC ex-Japan. In Latin America, it was values at $US48.1 billion. Half of the US loan volume were processed through four book-runners–all incumbent financial institutions.
Syndicated loan opportunities can be incredibly beneficial to those involved. For financial institutions, they disperse the risk of a single customer borrowing a large amount, and for customers, they enable the borrowing of large amounts that often would be too much for one lender to put up. Syndicated loans bring together a group of lenders led by one lender in charge who underwrites the loan and coordinates with the other lending institutions. The borrower receives one note or credit line, dissimilarly to other loans.
However, the growth of the market is limited by over-complicated and inefficient back-office operations. For example, the selection of syndicate members necessitates a labor-intensive review of information taken from multiple sources, which can take a while to collate and verify. A similar process is required for the qualification of borrowers.
Syndicated loans are highly reliant on data access and manual processes, moreover they are littered with delays. Intermediaries such as book-runners who are required to step in and disburse principal and interest add costs and delays as do third-party firms who often manage ongoing loan servicing on behalf of the syndicate.
Towards the end of the process, verifying funds for settlement can translate into a wait of up to three days for investors to access their money.
Not only do the many components and parties involved in this process create complication, much of the work is also down in silos which can create duplication and redundant work.